Definition (canonical)
Corporate income tax (CIT) is the tax companies pay on their profits — the state's share of what remains after costs. Simple in principle, it is where accounting meets law: the taxable base rarely equals the profit in the books, and the differences are where tax practice lives.
From accounting profit to taxable base
The bridge runs: accounting profit → add back non-deductible costs (fines, representation expenses, portions of financing costs above limits) → subtract exempt income and reliefs (R&D super-deductions, IP-box regimes) → apply loss carryforwards from prior years → taxable base × rate. Two structural features shape behavior everywhere: depreciation schedules (capital purchases deduct over years, not at once — timing matters more than totals) and loss carryforward rules (a bad year becomes a shield for good ones, within limits). This is also why "profitable company, zero tax" is often mundane arithmetic — accelerated investment relief plus prior losses — rather than scandal.
Rates, small-business regimes and the dividend layer
Headline rates across the OECD cluster around 19–27%, with reduced rates for small companies common (Poland: 9% under revenue thresholds vs standard 19%). The layer founders forget: corporate profit distributed as dividends is taxed AGAIN at the shareholder — the classic double taxation that makes owner-level comparisons between corporate and pass-through forms non-trivial. A growing family of regimes taxes only DISTRIBUTED profit (Estonian-style CIT, adopted in Poland as "estoński CIT"): reinvest and defer tax indefinitely — transformative for growth companies that would rather compound than distribute.
The global chessboard
Profit is mobile; factories are not — hence transfer-pricing rules (intra-group transactions at market prices, documented), anti-avoidance regimes (CFC rules taxing passive income parked in low-tax subsidiaries) and the OECD global minimum tax (15% for large groups) rewiring where multinationals book profit. For an SME crossing borders the practical takeaways: a foreign subsidiary or permanent establishment creates local tax duties automatically, and intra-group invoices without substance are the fastest route to a two-country audit.
FAQ
Is corporate tax paid on revenue or profit? Profit — costs deduct first. Revenue-based regimes exist as simplified options for small business, but classic CIT taxes the net.
Why do effective rates differ from headline rates? Reliefs, loss usage, depreciation timing and income mix — comparing companies by headline rate alone compares almost nothing.
Estimated payments? Most regimes collect monthly or quarterly advances against the annual settlement — cash-flow planning must include the tax calendar.
Related: Net Profit · EBITDA · VAT Reviewed: 2026-07-15 · Sources: OECD tax data